10/02/2016

Wildenstein Trial

The NY Times reports on the French court case of tax fraud and money laundering against art dealer Guy Wildenstein. The NY Times states the family used "foreign trusts, shell companies, and freeport warehouses to shelter art works and obtain loans against the security of the assets for other investments."

The collection currently is worth around $875 million, one time worth over $1.1 billion and had included over 2500 works. According to the article, the family has sold about 275 works to raise over $200 million for family expenses.

The NY Times reports

PARIS — Guy Wildenstein, the billionaire international art dealer, is most accustomed to his company’s regal limestone headquarters on the Upper East Side of Manhattan. But for the last few days, he has stood at a wooden dock in an ornate courtroom here, fending off questions about inheritance taxes and a maze of financial trusts that a French judge described as part of the family’s DNA.

After months of legal delays, Mr. Wildenstein, 70, and seven others — including his entourage of Swiss and French financial advisers — are on trial at the Palais de Justice on charges of tax fraud and money-laundering in a process that is to continue through Oct. 20.

Mr. Wildenstein, president of Wildenstein & Co. in New York, is accused of underestimating inheritance taxes after his father, Daniel, died in 2001 in France at 84. Prosecutors contend that Mr. Wildenstein and his brother, Alec, schemed to hide art and assets in complex trusts and abruptly moved millions of dollars in artworks from New York to Switzerland days after their father died.

For this secretive family — with a presence in the art world dating back four generations — the trial has offered a glimpse of tense financial disagreements and quarrels over estates in testimony delivered in French, English, Russian, German and financial jargon. It also has provided a rare accounting of the size and worth of the family’s old master and Impressionist works now stored in Switzerland, Singapore and the United States.

A tribunal of judges is probing the opaque system by which the international art market uses foreign trusts, shell companies, and freeport warehouses to shelter art works and obtain loans against the security of the assets for other investments.

Tax fraud carries a maximum prison sentence of seven years and possibly other fines. The French government has calculated that the estate could owe, with fines and interest, at least 550 million euros, or roughly $600 million.

Mr. Wildenstein’s defense is that he was advised by his lawyers that he did not have to disclose the trusts to French authorities since those entities, and not the family, technically owned the paintings. But during the opening days of the trial, Olivier Géron, the presiding judge on the tribunal, repeatedly elicited information from the financial advisers indicating that the family had made critical decisions about art sales and demands for distribution of money.

Under the French system, the judge is free to call witnesses back to the stand immediately to ask them questions when their testimonies conflicted.

He also demanded an explanation from Mr. Wildenstein regarding the sudden movement of artworks after his father’s death and why his father had created four offshore trusts registered in the Bahamas and Guernsey, a Channel island that is part of Britain.

“Did he explain his motivation?” the judge asked, pressing Mr. Wildenstein, who faced the judge with more than 20 lawyers in black robes arrayed behind him, representing him and the other defendants.

“The protection of the heritage,” Mr. Wildenstein replied in a low voice, noting that his father had feared the dispersion of the collection and had not explained his decisions. “He was a man of few words.”

The Wildenstein family has long maintained a mystique about its holdings. No one knew what rested in their vaults in New York and Tokyo and in a research institute in the heart of Paris on the Rue la Boétie. During the trial, the tally emerged. In 1998, Daniel Wildenstein created an offshore Delta Trust in the Bahamas to hold almost 2,500 works that he valued at about $1.1 billion before his death. The Royal Bank of Canada managed it to provide funds for the family, selling artworks or making loans against their value.

About 675 works have been sold, raising about $238 million for family members, according to a bank representative, Brian Taylor, who valued the collection today at about $875 million. The remaining works are now divided among the United States, Switzerland and Singapore, he said.

Two other Wildenstein family members are also on trial in the case, including Guy Wildenstein’s nephew, Alec Jr., and Liouba Stoupakova, the widow of Mr. Wildenstein’s brother, Alec. She is estranged from the family and engaged in a continuing legal battle over her share of the proceeds from trusts created by her husband, who died in 2008.

The Wildensteins have long confronted legal challenges from generations of women in the family who have complained of having been excluded from the business or cheated out of inheritances. Sylvia Wildenstein, Daniel’s widow, sued her stepsons over her late husband’s estate, contending that assets had been hidden from her in the trusts.

Ms. Stoupakova’s frosty relationship with Guy Wildenstein was apparent when she testified in Russian and was pressured by his attorney to supply information about her Swiss bank account. She refused to respond, snapping, “I’m at war with this family.”

While she testified, Mr. Wildenstein rolled his eyes and shook his head.

During questioning on Thursday, Judge Géron pointedly raised the issue of whether women in the Wildenstein family are treated differently than men.

“I have the feeling,” he said, “that the men and women are not necessarily considered in the same way in the customs of the family.”

“I believe that you are mistaken,” Mr. Wildenstein replied, noting that for the youngest generation, “there are no differences between the male grandchildren and female grandchildren.”

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Todd W. Sigety, is a certified member of the International Society of Appraisers and is a partner in the Appraiser Workshop, developers of the Good, Better, "Best" Appraiser Workshop. He owns two Antique galleries in Old Town Alexandria, VA where the workshop is held. He currently serves as the President on the National Board of Directors for the International Society of Appraisers. He is also the creator and editor of the Journal of Advanced Appraisal Studies.

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